What is a guarantor home loan?
A Guarantor Loan is like a normal home loan except that somebody has agreed to offer a guarantee to the lender that the loan will be repaid. First home buyers with little or no deposit often need their parents or family member to guarantee their application in order to ensure approval.
The guarantor is liable in the event that the borrower cannot repay the debt. In the event that the loan cannot be repaid, the lender will generally sell the borrowers property and the guarantor will be liable to pay the remaining amount.
In some cases, clients are not sure of what they want until some of the possibilities or ideas they have are brought to life as potential scenarios. We will inform and educate you on what might be possible in securing your financial future, and go through the advantages and risks of each scenario to help you make an informed decision, with a clear idea of how to manage things going forward
Why do people use Guarantor Home Loans?
• You can borrow 100% or more of the purchase price.
• You do not need to have saved a deposit.
• You will pay no Lenders Mortgage Insurance, savings yourself thousands of dollars!
• You can get the same professional package and basic loan discounts.
• Lenders are less conservative and so you are more likely to get approval.
Over 60% of first home buyers get some type of help from their parents when buying a property. This is usually in the form of a giving them a deposit as a gift or by guaranteeing their home loan.
What names are used for guarantor loans?
Every lender seems to have come up with their own name for guarantor loans! “Family Pledge”, “Family Support” , “Family Equity”, “Family Guarantee”. Confused yet?
Don’t worry, they all mean essentially the same thing. Most of these terms refer to a security guarantee, as only a few select lenders allow other types of guarantees. There are big differences between the bank’s credit guidelines, loan types and discounts for family guarantee loans.
Who can be a guarantor?
Most banks will only allow parental guarantees, i.e. a guarantee from the borrower’s parents. Some lenders can consider guarantees from immediate family members such as siblings, grandparents, spouses, de facto partners or adult children. This is because banks want to make sure that the guarantor has a strong relationship with you
Removing the guarantee
Ultimately you do not want the guarantee to be in place for the entire term of the 30 year loan. Most people are able to remove the guarantee somewhere between 2 and 5 years after they initially set up the loan, although this can vary significantly. Because many guarantees are set up because the borrower has no deposit, removing the guarantee most often depends on how much the property appreciates in value and how much in extra repayments the borrower can afford to make.
How is the mortgage for the guarantee structured?
The loan is secured by both the property that you are buying and the property owned by the guarantor. It is quite simple, and if you use a limited guarantee then the guarantor can reduce their exposure to your mortgage.
Apply for a home loan
We will assist you to apply for a home loan. In the application process, we’ll assess lending criteria such as income, your mortgage repayment history, other loans and financial commitments.
We may complete a property valuation to work out how much your current home is worth. If your application is approved, you’ll receive a letter of offer and loan contract for the new home loan
You don’t need to shop around, G-Force Finance Solutions will do all the legwork for you. We are your one stop finance solutions shop. We offer a wide range of loans from the banks and other lenders. We’ll help you compare your current loan to all the loans on our panel, helping you find the one that’s just right for you saving you lots of time, and potentially thousands of dollars.
Visit our Loan calculators today and take the next step by clicking the “Quick Quote” Button and our finance advisors will then get to work on sourcing you a tailor made Home Loan package from our trusted panel of lenders and will work tirelessly to get you the right solution.